EU commission foresees two treaty changes to reach full integration

The EU commission Wednesday published its vision for a "genuine" economic and monetary union (EMU) under which national budgets could be vetoed and a central European budget would allow transfers for troubled countries.

The process would require two rounds of treaty change – one within the next five years and another more profound exercise in the longer-term.

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The 52-page blueprints emphasises the need for the eurozone to be able to "integrate quicker and deeper" than the rest of the EU, with the eurozone now largely seen as paying for being established as a political project without the fundamental economic and financial structures to back it up.

Ideas for the future include coordinating national tax and employment policies, eurobonds, and a eurozone budget managed by a treasury in the European Commission.

European Commission President Jose Manuel Barroso said the "main message" of the document is that both discipline and solidarity are needed for the EMU to survive.

The paper envisages progress in three steps.

Within the next 18 months, the EU should set up a banking union and establish a "convergence and competitiveness instrument" - money that member states would use to undertake structural reforms. Countries with a budget deficit breaking EU rules would be obliged to use the instrument.

Within five years, the "convergence instrument" would be built up into a separate eurozone budget that would be funded by own taxes in the eurozone.

This time frame would also see "further budgetary coordination (including the possibility to require amendments to national budgets or to veto them)," says the paper.

There should be short-term eurobonds - the pooling of euro states' debt - and a redemption fund for states with large public debt. These steps would need a treaty change.

Other steps to consider would be giving "clear competence for the EU level to harmonise national budgetary laws and to have recourse to the Court of Justice in case of non-compliance."

Final steps to full economic and monetary union would only be taken in the "longer term" and would require "major treaty reform" suggests the paper.

This would likely include a possibly large central budget with stabilisers – meaning money would be transferred to member states in trouble.

“As a final destination it would involve a political union with a central budget as its own fiscal capacity and a means of imposing budgetary and economic decisions on its members.”

Noting the “degree” of sovereignty member states would have to hand to Brussels, the paper suggests that the European Parliament “primarily” needs to ensure the democratic nature of the process.

The blueprint underlines that intergovernmentalism – where governments alone take decisions – would undermine the “accountability” of the set-up.

The paper is to feed into a report on the future of economic and monetary union to be discussed by EU leaders next month.

Many of the ideas proposed have already cropped in other commission papers but the main stumbling block remains unchanged – the political will of member states.

EU leaders will discuss at their summit next week the commission's proposals, which include a European Monetary Fund and an EU finance minister - but no eurozone budget, as proposed by French president Emmanuel Macron.